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Capital pours into wine sector
By Yu Lu (China Daily)
Updated: 2004-09-28 08:41
The huge growth potential and high profit margins in China's wine market have
lured more and more capital investment into the industry.
Earlier this month, Macro-Link Holdings Ltd paid 154 million yuan (US$18.6
million) for 40.7 million shares in the well-known wine producer, Tonghua Grape
Wine Co Ltd.
After the acquisition, Macro-Link will have a 29 per cent controlling stake
in the Shanghai-listed company, paving the way for its future development in the
wine industry.
Macro-Link engaged in indus- tries diversified as manufacturing, trade,
financial investment and real estate development entered the wine market by
acquiring the Yunnan Shangrila Winery three years ago.
It has invested 200 million yuan (US$24 million) in building a vineyard in
Penglai, in East China's Shandong Province.
Macro-Link's acquisition of Tonghua is just part of the capital investment at
present in the domestic wine market.
Hong Kong-listed Tianjin Development Holdings announced this month that it
plans to spin off its winery subsidiary Dynasty Winery Ltd and list it on the
main board of Hong Kong.
In May, CITIC Guoan Group increased its investment of up to 500 million yuan
(US$60 million) in Sun Time International Winery, expanding its shares in the
winery to 49 per cent.
Sun Time has also invested 30 million yuan (US$36 million) for a new vineyard
in Shandong Province.
"Increasing investment in the industry is mainly due to the huge growth
potential in China's wine market," said Geng Zhaolin, director of the China
Alcoholic Drinks Industry Association.
Statistics show per capita wine consumption in China is only 0.5 litres a
year, while the annual world average figure is 7.5 litres.
However, wine consumption in China has grown rapidly in recent years. From
1994 to 2000, global wine output grew by only 6.5 per cent, but during the same
period China's wine consumption increased 61.8 per cent.
Market demand for wine products in the country will continue to grow by an
average of 8 to 10 per cent a year, a market survey carried out by leading
domestic wine producer Changyu shows.
Because of the huge market potential and China's tariff cuts on wine imports,
foreign wine makers are also developing a growing interest in the market.
France's largest wine and spirit producer and retailer, Les Grand Chais de
France, announced in September it is going to launch its J. P. Chenet range of
products, the best selling wine brand around the world, in
China.
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